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Wednesday, June 29, 2016

VAT create thousands of Jobs in U.A.E

Hundreds of new
employees will be hired over the next few months in the UAE and the rest of the
Gulf Cooperation Council (GCC) region as companies prepare for the
implementation of value-added tax (VAT), according to human resources and tax
specialists. Demand for accounting, IT, finance or VAT support staff to
increase over the next 18 months, according to a tax expert

Recruitment is already
underway in the UAE and the demand for accounting, finance and tax executives,
as well as information technology (IT) professionals is only expected to grow
as the VAT rollout draws closer.

Companies will also
have to deal with the challenge of restructuring their finance and IT
departments, orient their existing staff and re-evaluate the knowledge and
experience of resources.

“The demand for
accounting, tax [executives] and IT professionals will be at a premium over the
next 18 months as GCC companies grapple with the requirement to prepare their
systems for VAT,” Finbarr Sexton, indirect tax leader for the Middle East and
North Africa at Ernst & Young (EY), said.

“UAE companies have
already started recruiting VAT support staff. However, we expect demand to grow
from September onwards and the major VAT recruitment will be in full flow
throughout 2017.”

Sexton said companies
in the UAE will now have to beef up preparations for the collection of VAT,
given that the schedule of implementation is only about one year and six months
away. Any company that procures or sells products and services will now have to
upgrade their processes and look at the different aspects of their business,
from the supply chain all the way to the end customer.

VAT has an impact over the full supply chain of
a business from procurement all the way to marketing and sales. The most
significant constraints that businesses will face include the transformation of
ERP systems to incorporate VAT, designing proper processes to manage VAT and
staff up with the right level of skilled personnel to manage the VAT roll out.
There will be a shortage in IT implementers to do the ERP transformations and
more critically, a major shortage in suitable skilled staff with knowledge of
VAT and the requirements to implement VAT across the business processes.

When it comes to sourcing
of talent, businesses can expect some hiccups, given that thousands of other
companies will also be scrambling to hire skilled professionals to help with
VAT implementation.

The finance ministers
in the Gulf Cooperation Council (GCC) region approved during an extraordinary
meeting this month the introduction of VAT across the region. Some procedural
aspects will need to be taken up in another meeting, but it was made clear that
the GCC states would be ready for the first phase of the VAT rollout by the
beginning of 2018.

Another meeting is
expected to be held in October 2016, when the VAT framework is likely going to
be finalised.

The need to expand
headcounts doesn’t mean there are jobs for everyone. HR experts said companies,
for one, need to be careful when it comes to the screening of applicants.
However, with the new job openings, a lot of accountants who are not qualified
might find themselves displaced.

“It’s safe to say that
thousands will be recruited. However, a lot of accountants without relevant
experience will lose their jobs because they are not qualified or experienced
in the area,” Nickisch said.

An IT manager at a
multinational company, however, said that not every company might require
additional manpower. "It's more a problem for small companies who don't
have a system that supports tax. Big companies who operate in markets like Europe,
United States and other areas where VAT is present, should not find it
difficult to transition into the new tax system without hiring support
staff," the source said.

Nickisch said that the
concern should be focused on the “shortage of resources with the right
experience and relevant skillset to manage and assist organisations during the
transition into a taxable environment.”

It is important that
candidates and existing staff members should have the relevant work experience
in the GCC, but they should also be “conversant in reporting, recording and
filling sales tax returns with the relevant authorities.”

“Not only is a thorough
understanding of tax implications and how they will in turn affect the product
pricing, cash flow and profitability of the business a pre-requisite, but the
knowledge on key concepts, such as tax refunds, tax exemptions, zero rated
taxes, tax rebates, input and output taxes as well as tax treaties with other
countries is important when considering any future recruitment or professional
development,” Nickisch said.

“With the vast majority
of organisations across various industries in the UAE being affected by the
implementation of VAT, it’s not merely the volume of new recruitments, but also
the restructuring of the existing finance and IT departments that will take place.”

Younis Al Khoury, the
UAE minister of finance had also announced that businesses in the country that
have annual revenues of more than Dh3.75 million “will be obliged” to register
under the GCC VAT system.

On the other hand,
companies that make annual sales revenues between Dh1.87 million and Dh3.75
million “may elect as an option” to register for VAT during the first phase,
hence, there is a possibility that not every single company in the UAE will be
able to register on time and start collecting VAT on January 1, 2018. The
Ministry has introduced a lower sales revenue threshold that will allow small
to medium sized businesses to register for VAT. These businesses are unlikely
to register in the first phase of the VAT introduction.

For unregistered
businesses VAT therefore becomes a real cost of doing business and impacts
profit margins and will make such businesses uncompetitive compared to their
larger trading partners and competitors.

A fundamental principal
within a VAT regime is that VAT should not be a cost to a business. VAT
registered businesses collect VAT for the Government, but are allowed to offset
the VAT that they suffer on purchases against VAT on sales, and hence
businesses are VAT neutral from a cost perspective – the VAT cost is passed on
to the final consumer over the full supply chain from manufacture to eventual
sale